MBS has given way to short term technical resistance. The stack was unable to crest yesterday's intraday price highs after profit takers emerged when MBS prices were deemed too expensive (in dollar terms)

Change Since 3pm Closing Marks...

FN30_______________________________

FN 4.0 -------->>>> -0-02 to 100-15 from 100-17

FN 4.5 -------->>>> -0-01 to 102-02  from 102-03

FN 5.0 -------->>>> +0-00 to 103-03 from 103-03

FN 5.5 -------->>>> +0-00 to 103-22 from 103-22

FN 6.0 -------->>>> +0-00 to 104-13 from 104-13

GN30________________________________

GN 4.0 -------->>>> +0-01 to 100-18  from 100-17

GN 4.5 -------->>>> +0-00 to 102-05 from 102-05

GN 5.0 -------->>>> +0-00 to 103-19 from 103-19

GN 5.5 -------->>>> +0-01 to 104-00 from 103-31

GN 6.0 -------->>>> +0-01 to 104-14 from 104-13

Note the short term triangle forming. The  teal line is yesterday's intraday high....we were unable to push prices any higher today even though TSY yields have moved lower today. At this point we have detached ourselves from the directional guidance offered up by TSY yields. Sometimes price levels can get too rich and profit takers will look to beat the rush to...take profits. If recent history holds (TSY yields stay stable/move lower) MBS coupons will look to test this overhead resistance level again.

Speaking of overhead resistance (as in too many fixed costs)...

Yesterday markets were sent into a tizzy after the Obama Administration's Automotive Task Force concluded that GM's current restructuring plan (submitted on February 17, 2009) was not viable and it was time for a change.  I know this is yesterdays news but I wanted to make sure that everyone was clear on the events that unfolded after the automakers failed to meet government outlined restructuring guidelines.

 Here are a few excerpts from the White House Viability Fact Sheet

Viability of Existing Plans: The plans submitted by GM and Chrysler on February 17, 2009 did not establish a credible path to viability. In their current form, they are not sufficient to justify a substantial new investment of taxpayer resources

General Motors: While GM's current plan is not viable.... This process will include leadership changes at GM and an increased effort by the U.S. Treasury and outside advisors to assist with the company's restructuring effort. Rick Wagoner is stepping aside as Chairman and CEO. The Administration will provide GM with working capital for 60 days to develop a more aggressive restructuring plan and a credible strategy to implement such a plan. The Administration will stand behind GM's restructuring effort.

Chrysler:  Chrysler is not viable as a stand-alone company. However, Chrysler has reached an understanding with Fiat that could be the basis of a path to viability.....Therefore, the Administration will provide Chrysler with working capital for 30 days to conclude a definitive agreement with Fiat and secure the support of necessary stakeholders. If successful, the government will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed. If an agreement is not reached, the government will not invest any additional taxpayer funds in Chrysler.

A Fresh Start to Implement Aggressive Restructurings: While Chrysler and GM are different companies with different paths forward, both have unsustainable liabilities and both need a fresh start. Their best chance at success may well require utilizing the bankruptcy code in a quick and surgical way. Unlike a liquidation, where a company is broken up and sold off, or a conventional bankruptcy, where a company can get mired in litigation for several years, a structured bankruptcy process - if needed here - would be a tool to make it easier for General Motors and Chrysler to clear away old liabilities so they can get on a path to success while they keep making cars and providing jobs in our economy.

Plain and Simple: GM is in trouble. The restructuring plans must include a drastic reduction of debt which means creditors must be paid off. GM either needs to cut a deal with creditors or raise more capital/increase revenue. Well consumers are not buying new cars and GM's stock is off limits to most non-day trader investors....unless creditors are willing to take a loss it will awfully hard for GM to devise an effective restructure plan. That said.... The Obama Administration recognizes that GM and Chrysler's "best chance at success may well require utilizing the bankruptcy code". Yuck!

Even a well organized and managed bankruptcy would have detrimental effects to production and unemployment rates. Psychologically, protectionism would be even more difficult to break and consumers would consequentially spend less money. This would lead to the intensification of decreasing aggregate demand and increasing unemployment which implies well....there are bad implications for the global economy.

When considering your whether or not markets have hit bottom...just know the failure of an automaker has the potential to amplify protectionist strategies and further weaken the GLOBAL economic outlook. Anything to do with a car or truck is headline news at the moment!